A recent poll shows that big Japanese companies are upbeat about the impending sales tax increase despite the less than expected rosy outlook on the country’s financial and economic status. Some are even positive that profits will continue to come in despite a rocky year in which ‘Abenomics‘ seems to have lost its luster.
While many fear that the tax hike will affect consumer spending, with many taking advantage of their purchasing power before it takes effect and then tightening belts afterwards, the survey conducted by Reuters Corporate showed 59 percent of respondents are positive that the return in revenue will come in as early as nine months after the hike. The number is higher than the 47 percent that took the survey last December. Also, 40 percent of the respondents believe that the economy will bounce back as early as 6 months, a large jump from the 29 percent that answered the same in December.
The positive perspective is due in part with the payments of bonuses and public works spending and building efforts in line with the reconstruction of Fukushima and preparations for the 2020 Tokyo Olympics. An executive from a machinery maker responded to the survey saying, “Passing along the costs of the sales tax hike is going smoothly overall. I don’t think it will take much time for sales to recover.” Results from the survey showed that more than fifty percent of the companies are looking at higher revenues in the following business year beginning in April. Others think an increase will only be slightly higher than this year while a third answered revenue will almost be the same as the last fiscal year’s.
While the outlook on corporate profits remains very positive, the survey highlighted the challenge to self-sustaining recovery through Abenomics. Many manufacturers plan on using finances for research and development and have turned overseas for expansion projects, which is worrisome according to Japan Research Institute senior economist Hideki Matsumura. He noted, “Corporate profits have gotten better, but the Japanese economy will not if this is the case.” The survey also showed that a fourth of the respondents are worried about Abe’s nationalistic stance but only less than half thinks it has affected their businesses overseas while a third is unsure of its impact.
Comments Off on JDP Startup Corner: Pros & Cons of Working with a Partner in Japan